The effectiveness of food price stabilization policies : the experience of Mali (2004-2009) [Abstract]

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The effectiveness of food price stabilization policies: the experience of Mali

(2004 - 2009)

Franck Galtier, CIRAD - UMR MOISA

Summary

What has been done?

Since 2004, Mali has used four instruments to periodically

stabilize domestic cereal prices (millet, sorghum, maize and rice): (i) a ban on exports

(2007 and 2008), (ii) a recovery plan to boost production through input subsidies (for

rice in 2008; for rice, maize and wheat in 2009), (iii) public stocks (especially since 2005,

when two new types of stocks were set up (the State Intervention Stock and cereal

banks), and (iv) tax exemptions on cereal imports (for rice and maize in 2005, 2007, 2008

and 2009 and for maize only in 2005). The outreach of these government interventions

as well as their modalities have varied considerably, depending on the instrument, the

year and products targeted.

How has it been implemented?

The decision-making process is complex. The different

instruments are often managed by different agencies (e.g., the Ministry of Commerce

for export bans and tax exemptions on imports; the Ministry of Agriculture for recovery

plans; the cereal bank management committee for decentralized stocks, located in 703

of the country’s municipalities). Decisions are made by the President and the office of

the Prime Minister, with support from the Food Security Commission. The effective

implementation of policies has sometimes proved difficult. Export bans have been

circumvented. Importers have not always benefited from tax exemptions. The

subsidized inputs for producers often arrive late, and in insufficient quantities

(particularly for seeds). Finally, purchases for certain public stocks at times came too late

(especially for the State Intervention Stock, which lacks working capital to make timely

purchases).

What were the effects?

The ban on exports has not managed to discourage cereal

exports. Not enough, at least, to affect prices in Mali. The bans have not had the

expected moderating effect on consumer prices, but nor have they penalized

producers—or only very marginally. Policies to boost production have had a moderate

impact on production levels (+ 20% below the stated goal of a 50% increase) and prices

(which declined slightly and stabilized at a high level). Public stocks have had little effect

on prices. Perhaps they have helped absorb fluctuations due to seasonality, but they

have failed to contain increases in times of crisis. This is probably due to the small size

these operations: only 28,000 tons were released during the crisis of 2005 (15,000 tons

of dry cereals + 13,000 tons of rice) and 53,000 tons during the 2008 (32,000 tons of dry

cereals + 21 000 tons of rice). The tax exemptions on imports has had a moderating

effect on prices of imported rice, but have also driven down prices of locally produced

cereals (including dry cereals). This is what happened in the Kayes region in 2005 and in

various other areas in 2009. This phenomenon holds true for both consumer prices and

producer prices.

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What recommendations could be derived?

The instruments that have been

found to be potentially effective are tax exemptions on imports, recovery plans

to boost production, and public stocks (provided they grow in size). The form of

governance and decision-making process is at least as important as the choice of

instruments. For example, for public stocks to be effective, their administrators

need working capital at their disposal. Similarly, for tax exemption measures to

be effective, importers must actually benefit from them. This implies defining the

terms of these exemptions with the importers, and ensuring compliance through

control measures.